On June 16, 2016, Delaware Governor Markell signed into law House Bill Number 371, which amends the Delaware General Corporation Law, Title 8, Chapter 1, Sections 101-398. Section numbers cited below refer to sections in the Delaware General Corporation Law. The bill is generally effective on August 1, 2016 with varying effective dates for specific transactions. (See Sections 16, 17, and 18 of the bill for further effective date information). Here are the highlights:
Section 111(a)(2) is amended to provide that any civil action to interpret, apply, enforce or determine the validity of the provisions of any instrument, document, or agreement (1) by which a corporation creates or sells, or offers to create or sell, any of its stock, or any rights or options respecting its stock, or (2) to which a corporation and one or more holders of its stock are parties, and pursuant to which any such holder or holders sell or offer to sell any of such stock, or (3) by which a corporation agrees to sell, lease or exchange any of its property or assets, and by which its terms provides that one or more holders of its stock approve of or consent to such sale, lease or exchange; may be brought in the Court of Chancery, except to the extent that a statute confers exclusive jurisdiction on a court, agency or tribunal other than the Court of Chancery.
Board of Directors
An amendment to Section 141(c)(3) provides that references in the chapter to a committee of the board of directors or a member of a committee shall be deemed to include a reference to a subcommittee or member of a subcommittee, with a limited exception.
An amendment to Section 158 provides that any two authorized officers of the corporation may sign stock certificates on the corporation’s behalf. Previously, the section included the titles of specific officers.
Domestic Corporation Merger or Consolidation
An amendment to section 251(h) states that notwithstanding the requirements of subsection (c) of this section, unless expressly required by its Certificate of Incorporation, no stockholder vote of a constituent corporation that has a class or series of stock that is listed on a national securities exchange or held of record by more than 2000 holders immediately prior to the execution of the agreement of merger by such constituent corporation shall be necessary to authorize a merger if expressly permitted or authorized by the agreement of merger. Section 251(h)(2) also provides that an offer for stock may be conditioned on the tender of a minimum number or percentage of shares of the stock of such constituent corporation, or any class or series thereof and delineates what the offer may exclude. Amendments to the section also include definitions of “affiliate”, “excluded stock”, “received” and “rollover stock”.
Section 262(c), as amended, provides that if a Certificate of Incorporation provides for appraisal rights, an appraisal proceeding is to be dismissed if Section 262(g) applies. Section 262(g), as amended, provides that if immediately before the merger or consolidation the shares of the class of stock of the constituent corporation as to which appraisal rights are available were listed on a national securities exchange, the Court shall dismiss the proceedings as to all holders of such shares who are otherwise entitled to appraisal rights unless (1) the total number of shares entitled to appraisal exceeds 1% of the outstanding shares of the class or series eligible for appraisal, (2) the value of the consideration provided in the merger or consolidation for such total number of shares exceeds $1 million, or (3) the merger was approved pursuant to Section 253 or Section 267 of this title. Section 262(h) is amended to provide for cash payments to stockholders before the entry of judgment in the proceedings.
Restoration of Expired Certificate of Incorporation
Section 311, as amended, includes a procedure for a corporation to revoke dissolution or restore its Certificate of Incorporation after it has expired by its own limitation. Any corporation that revokes its dissolution or restores its Certificate of Incorporation pursuant to this section shall file all annual franchise tax reports that the corporation would have had to file if it had not dissolved or expired and shall pay all franchise taxes that the corporation would have had to pay if it had not dissolved or expired.
Revival of Certificate of Incorporation
Section 312 provides that any corporation whose Certificate of Incorporation has become forfeited or void pursuant to this title or whose Certificate of Incorporation has been revived, but through failure to comply strictly with the provisions of the chapter, the validity of whose revival has been brought into question may at any time procure a revival of its Certificate of Incorporation. (Notwithstanding the foregoing, the section shall not be applicable to a corporation whose Certificate of Incorporation has been revoked or forfeited pursuant to Section 284 of this title by the Court of Chancery.) The revival of the Certificate of Incorporation may be procured as authorized by the board of directors or members of the governing body of the corporation in accordance with Section 312(h) executing, acknowledging, and filing a Certificate of Revival in accordance with this title. The amendatory legislation delineates the requirements as to what information the Certificate of Revival must include, including those for execution.
Section 312, as amended, also provides that the requirement for authorization by the board of directors under subsection (c) shall be satisfied if a majority of the directors are members of the governing body then in office, even though less than a quorum, or the sole director or member of the governing body then in office, authorizes the revival of the Certificate of Incorporation and the filing of the required certificate. Similar provisions relating to certain exempt corporations are also amended in Section 313.
For additional information, review the full text of Delaware House Bill Number 371.
This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.